Of all the shocks from the Great Recession, the collapse of the resort real estate market is one of the biggest. Prices tumbled, projects dried up or went bankrupt, buyers disappeared. Where does the business go from here?

That’s what the Kelsey Norden Resort Real Estate Survey has been trying to determine over the past 18 months (for survey details, see box, page 28). In spring 2009, a survey of resort real estate professionals sought to understand potential changes in consumer behavior emerging from the economic crisis, and to estimate how long resulting trends might last. The initial survey was followed up by others in the fall of 2009 and spring of 2010.

These surveys showed that the mood in the industry has shifted from “fearful uncertainty” in 2009 to a more “resolved commitment to reposition resort residential communities to meet the new reality” currently. This “new reality” includes:

• Discounted values of 20 to 40 percent are expected to continue for two to three years, until the majority of the existing standing and shadow inventory is absorbed.

• Value is king. Buyers are compromising on unit size, services and level of exclusivity.

• High carrying costs are unacceptable.

• Those still in the market, end-users rather than the speculators of days gone by, are focused on a lifestyle experience that provides quality time with family and friends. They seek active community living, wellness programming and comprehensive health care to support a multi-generational family dynamic.

• Baby Boomers are shifting their second home purchase focus toward retirement.

In spring of 2010, the survey expanded to include more than 6,000 resort real estate consumers. In addition to confirming trends identified in the professionals’ surveys, the consumer survey presents a direct look at customer preferences in today’s resort real estate market.

While we are still tabulating all the data, we can begin to answer many of those “$64,000 questions” on the top of every developer and resort operator’s mind: “Is there still a market for resort real estate? Who’s buying, what do they want, and how are they going to get it?”


IS THERE A MARKET?
In the earlier surveys, industry experts estimated that up to 50 percent of the customer base was deeply wounded and never coming back to the marketplace. The consumer survey confirmed to us that there is, indeed, a large percentage that has left the market, but this slice may be smaller than originally anticipated. Of the consumers surveyed, 24 percent are ready to buy; another 28 percent are interested but plan to wait at least two years. In addition, 40 percent of those who already own a property are considering purchasing another.

This recent data also leads us to speculate that there is possibly a “new slice” to the pie that has been added with the emergence of a younger buyer—almost 20 percent of the consumers surveyed were less than 40 years old.


WHO IS THE CONSUMER?
An initial look at the consumer data as a composite, coupled with the intelligence gathered in the previous industry surveys, provides a generalized profile of today’s resort real estate buyer.

Today’s consumer:

1. Still wants a second home, but will go about it differently than the past.

This consumer is educated and performs a very thorough due diligence. Buyers must be convinced that a potential purchase is a good value, and they are intent on identifying low cost-to-carry properties. They will follow a credible seller, at a proven address. They are not interested in a speculative purchase. They are interested in built, not planned, vertical product over a land purchase.

2. Wants to own closer to his primary home.

Consumers want more use of their second homes. They are establishing—or maintaining—a resort lifestyle tradition that allows them to spend more time with family and friends. Convenience is key. Drive markets will benefit.

3. Thinks vacation properties are still overpriced and doesn’t understand the actual depth of current discounts.

Perception does not match reality: 48 percent of respondents believe that prices have dropped between 11 and 30 percent, with a majority of those thinking that discounts are 20 percent or less. In contrast, professionals indicated actual price cuts average 30 to 40 percent. This suggests a marketing opportunity for savvy sellers to correct this broad misperception and communicate new levels of affordability.

4. Wants everything to do with wellness, including food.
Activity is important—buyers want access to skiing/biking/jogging/walking/hiking trails. Health and wellness means more than a spa; it extends into all aspects of resort amenities, recreation, and programming.

5. Is interested in less extravagance, more pragmatism.
Customers will compromise on size, but won’t skimp on quality. They are not ready to give up the big master bath, but are happy to do away with the media room.

6. Is “bi-polar” about fractional products and uncertain about club products.

Today’s consumers are either “very interested” or “not interested” in fractional products. Success with this consumer base will be dependent on location, timing and product. While there is uncertainty related to interest in joining clubs (“will I use it enough?”), there was definite clarity that there would be more interest if fees and assessments were reduced.

7. Is a younger buyer.

Generation X is in the market and making a mark. With less anxiety over their dwindling nest egg (still decades out) and intent on providing the same family experience they grew to appreciate with their parents, this generation of buyers is growing. This particularly savvy set has recognized that values are down, but in prime locations won’t stay down, and see this as an opportunity to buy. This generation is also feeling a commitment to family and friends, as many in the generation before them regret working too hard and playing too little.


HUNCHES AND THEORIES
Further study and categorization of the survey information should lead to a much more detailed and specific understanding of who these new customers are and what they want. Based on the earlier surveys and conversations throughout the industry, we are testing a number of “hunches” against the consumer data. Among them:

1. We believe that the emergence of younger buyers (ages 35 to 45) is due to a number of factors:

a. These consumers are 2nd or 3rd generation of established resort family vacationers. They want to continue this tradition and create the same experience for their children that they had as kids.

b. The current economy and glut of “deals” have presented opportunities. Younger and less encumbered, Gen X-ers are better positioned to take advantage of these opportunities than 60- to 65-year-olds who don’t have the time to weather another financial storm.

c. In contrast to the intensity and work ethic of the Baby Boomers, X-ers are creating lifestyles that allow for more time with family and friends.

2. Usage of second home properties will increase. Early analysis suggests that future owners will want to use their resort homes to create more “meaningful” and “relevant” life experiences. Rather than own three or four underutilized properties, these customers will purchase and own one special place for more frequent use. (This is another reason why the due diligence process is lengthening).

3. Developers will need to take care of Boomers as they age. If not, they will go south. Our hunch is that many pre-retirees who have grown up in the mountains are dreading the “retirement community” experience. They want to be around youth, around recreation, in a beautiful environment, where their family will visit, where they have a history. They want to be in the mountains.

Boomers’ secondary homes will evolve into primary residences. This customer base will have increasing (and different) needs. In addition, providing a true multi-generation family experience demands that the needs of the older members of the family are met.

4. “Green” building is no longer a unique selling proposition. It is expected.

Putting the data through the additional filters will likely provide some more intelligence on these questions. We have just begun this more in-depth analysis, categorizing responses by age, geography, income levels, and perhaps most importantly, by those who have indicated that they are willing to buy within the next two years. We will revisit these initial questions, assumptions and hunches in a follow-up article in the November issue of SAM.

THE KELSEY NORDEN SURVEY
In spring of 2009, resort real estate industry colleagues Christopher Kelsey and David Norden began a collaborative research effort to better understand potential changes in consumer behavior emerging from the economic crisis, and to estimate how long resulting trends may last.

Three surveys of real estate professionals were conducted, in the spring and fall of 2009 and spring 2010. Initially, the survey tapped industry professionals in the belief that these experts would be better equipped than consumers to forecast the future of consumer behavior, as consumers were still reeling from the financial crisis. The consumer survey in summer 2010 followed. It was done in partnership with a geographically diverse group of 20 top-tier resort property developers, among them:

• Whistler Blackcomb, B.C.
• Winter Park, Colo.
• Steamboat, Colo.
• Durango, Colo.
• Crystal Mountain, Mich.
• Blue Mountain, Ontario
• Tremblant, Quebec
• Stowe, Vt.
• Okemo, Vt.
• Stratton, Vt.
• Snowshoe Mountain, W. Va.
• Wintergreen, Va.

The surveys closed in July, with more than 6,000 responses comprised approximately of 80 percent qualified, prospective customers and 20 percent existing owners. This extensive data provides an unprecedented view of current resort real estate consumer demographics and preferences.

As a mountain resort advisor and contributing author to the Kelsey Norden survey work, I have had the opportunity to sift through the initial data to prepare this “hot-off-the-presses” first look at the early results.

—Claire Humber